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Income Tax - Case Laws
Showing 21 to 40 of 173171 Records
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2025 (4) TMI 1612
Addition u/s 68 - unexplained cash deposits in his bank account - as alleged the assessee had submitted cash books, which had to be revised and there was a variation in the opening balance declared by the assessee in such cash book, which raised doubt as regards to the genuineness of such cash book, secondly, if the assessee was having substantial cash in hand there was no justification for further/regular cash withdrawals and the burden was on the assessee to substantiate as to why the assessee was regularly withdrawing cash from his bank account when he was having substantial cash in hand and thirdly, the assessee has shown a meagre cash expenditure towards household expenses which further supports that the cash book furnished by the assessee was non-genuine.
HELD THAT:- Despite the above points noted by the Department, it has not been disputed that the assessee had made regular withdrawals from his bank account, which as per the assessee was the source of cash deposits in his bank account.
As regards the contention of the assessing officer that the assessee had shown a meagre household expenses the Financial Year 2015-16 and 2016-17, the counsel for the assessee pointed out that this is factually incorrect and on this issue, the Tax Authorities have failed to critically analyse the cash book submitted by the assessee which has shown a higher amount of cash expenses towards household expenses.
Thirdly, we observe that the Department has not brought anything on record to demonstrate that the cash so withdrawn by the assessee from his bank account, had been utilised by the assessee somewhere else. Unless, the Department gives a specific finding on how the cash withdrawals made by the assessee from his bank account were not available with him for redeposit, then, in our considered view, no addition can be made by the Tax Authorities on the assumption/presumption that the same could have been utilised for household expenditures.
The assessee has been able to explain the source of cash deposits in his bank account and accordingly, the appeal of the assessee is allowed.
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2025 (4) TMI 1611
Addition u/s 69 - unexplained investments - HELD THAT:- As before us, AR drew our attention to the evidences to the source of payments were raised from assessee’s family members.
Assessee stated the sources for payment of sale consideration. We note that from the said statement, the assessee availed loan from HDFC Bank, own fund out of earnings, LIC policy maturity and family support. There is no dispute with regard to own fund out of earning, housing loan from HDFC and LIC policy maturity.
Funds availed from family members - On perusal Indian Bank statement, on examination of the same, we find that on 17.05.2014 & 27.05.2014, ₹.1 lakh and ₹.4 lakhs were received by the assessee from his brother. Assessee received ₹.2 lakhs from his wife on 12.11.2014. Again on 08.12.2014, he received ₹.1,30,000/- though cheque from Mr. Ramanathan. We find, on verification of the same, that the assessee explained entire sale consideration towards investment in immovable property by availing loan from HDFC, own earnings, LIC policy maturity and funds from his family members. But, however, the AO did not give credit to the same, thereby, in our opinion, the addition is not maintainable. Grounds raised by the assessee are allowed.
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2025 (4) TMI 1610
Demand u/s 201 & 201(1A) - “assessee in default” for non-deduction of TDS on certain expenses/ - HELD THAT:- We note that the facts remain admitted that no expenditure incurred by the assessee as on 31.03.2015. The provision was made on the basis of estimation relating to supply of services and goods by the vendors. The facts and circumstances of the case clearly show that no invoice is received by the assessee from the vendors and no payment was made to the vendors towards services and supply of goods rendered by the vendors as on 31.03.2015.
The provision was created by the assessee is only an estimation basis taking into account the quantum of services and supply of goods by the vendors. On an examination of the tabular form, which, clearly demonstrate the facts of the case in detail, which is not disputed by the Revenue, therefore, in this regard, we find the facts and circumstances, as referred by the ld. AR, in the case of Biocon Ltd. [2022 (4) TMI 795 - ITAT BANGALORE] are similar and identical.
The assessee received invoices from the vendors to an extent of ₹.24,76,17,968/- only, meaning thereby the provision created was in excess by ₹.3,11,71,303/- [₹.27,87,89,271 – ₹.24,76,17,968/-]. When the payment is made, the provision for expenses account shall be debited with ₹.24,76,17,968/-, which will leave a credit balance of ₹.3,11,71,303/- in the provisions for expenses account. This remaining credit balance is transferred to profit and loss account. Accordingly, the provision for expenses account is shown NIL balance and there is impact on the profit and loss account of the succeeding year by way of income of ₹.3,11,71,303/-.
Short deduction of TDS on the excess provision - We find force in the arguments of the ld. AR that no interest could be imposed on excess provision, which remained unpaid. Further, we note that the said excess provision was transferred to profit and loss account and admittedly, there is an impact on the P & L account in the succeeding year. Therefore, we find when the said excess provision is not paid to any vendor and there is no recipient to the said amount, when there is impact on P & L account by way of income, in our view, the Assessing Officer, holding short deduction and levying interest on such short deduction is not justified. Therefore, we hold that there is no short deduction under section 201 of the Act and the interest under section 201(1A) calculated at 1% per month on such short deduction of TDS for a period of 85 days on the amounts which remained unpaid is not justified and it is deleted. Thus, the grounds concerning the issue under section 201/201(1A) of the Act is allowed.
Interest u/s 201(1A) imposed on the situation i.e., the actual payment made in the succeeding year is less than the provision amount - We note that admittedly, actual payment was made less than the amount of provision made. There is no doubt the TDS was deducted by the assessee at the time of credit or at the time of making actual payment to the vendors of the assessee. We find, since the yearend provision was made as on 31.03.2015, the date on which TDS was deductible shall be on 31.03.2015. Thus, the assessee is liable to pay interest from that date to the date of actual deduction/payment as per the provisions of section 201(1A) of the Act on the amount of actual payment made.
In the present case, as already discussed above, the provision of ₹.27,87,89,271/- was made as on 31.03.2015 and actual payment was made to an extent of ₹.24,76,17,968/-. Therefore, the liability to deduct TDS shall be on the amount of actual payment only. In this scenario, following the order of Biocon Ltd. [2022 (4) TMI 795 - ITAT BANGALORE] we hold the tax liability upon the recipient will be on the amount to extent of ₹.24,76,17,968/- and accordingly, the TDS liability also on the said amount actually paid and interest under section 201(1A) of the Act is liable to be paid on ₹.24,76,17,968/-.
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2025 (4) TMI 1609
Maintainability of appeal as per section 249(4) - assessee had not paid the tax on returned income and the particulars of payment was also not mentioned in column 8 of Form 35 - HELD THAT:- It is pertinent to note that the provisions of section 249(4)(b) of the Act is clear that appeal before the ld. CIT(A) should be admitted only when the assessee has paid an amount equal to the amount of advance tax, which was payable by him. Where the return of income has not been filed the proviso to said section also describe that the assessee will get exemption from this clause, if an application is made before the ld. CIT(A) for not paying an amount equal to the amount of advance tax for any good and sufficient reason to be recorded in writing.
In the instant case, as observed by the AO that the assessee had stated that they have exempted income for the financial year 2016-17 and therefore, not filed the income tax return for the said period.
Before us also, assessee submitted that the assessee’s income are exempted and therefore, the question of paying advance tax does not arise in the case of the assessee as no amount is payable by the assessee. Being so, we are of the opinion that dismissing the appeal on the grounds that the same is not maintainable as per section 249(4) of the Act is not sustainable as the income of the assessee are exempt from income tax. The assessee is not liable to pay any advance tax even though they have not filed the return of income. Therefore, this ground of the assessee is allowed.
Unexplained cash credit u/s 69A and denial of exemption u/s 80P - In the present case assessee had submitted the reply along with the cash book and income and expenditure account during the course of assessment proceedings. We are of the considered opinion that since the ld. CIT(A)/NFAC has not considered the grounds of appeal raised by the assessee on merits and therefore in the interest of justice and equity, we are remitting the entire issue in dispute to the file of ld. CIT(A)/NFAC for fresh consideration.
Appeal filed by the assessee is partly allowed for statistical purposes.
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2025 (4) TMI 1571
Jurisdiction of issuing notice u/s 143 (2) - omission on the part of the DCIT in not issuing notice u/s 143 (2) to the assessee - Whether the assessee can challenge the authority of the ITO, who had issued the notice u/s 143 (2) and the authority of the DCIT for issuing the assessment order u/s 143 (3) in view of the limitations prescribed under Sections 292B and 292BB of the I.T. Act? - HELD THAT:- Section 292B provides that notice as well as return of income, assessment, summons, etc., issued under the provisions of the I.T. Act cannot be treated as invalid merely by reason of any mistake, defect or omission in such notice, etc., if the same is in substance and effect in conformity with or according to the intent and purpose of the I.T. Act.
ITAT, in the present case, has interfered with the order passed by the CIT (Appeals) and the assessment order mainly on the ground that there is omission on the part of the DCIT in not issuing notice u/s 143 (2) to the assessee.
ITAT has not concluded that the notice issued to the assessee by the Income Tax Officer u/s 143 (2) is not in substance or not in conformity with the intent and purpose of the I.T. Act. In the absence of such finding, the ITAT cannot interfere with the notice or the assessment order issued against the assessee.
In the present case, apart from that, the assessee is also debarred from challenging the assessment proceedings for the first time before the ITAT on the ground of issuance of notice under Section 143 (2) by the Income Tax Officer in the light of the provisions of Section 292BB of the I.T. Act. Section 292BB of the I.T. Act clearly provides that where an assessee has appeared in the proceedings relating to assessment or reassessment before the authority concerned without raising any objection before completion of assessment or reassessment, it is not open for him to raise such objection after passing of the assessment order. In the present case, the notice under Section 143 (2) of the I.T. Act was issued by the Income Tax Officer and was duly served upon the assessee, who, in turn, had appeared before the DCIT, to which the proceedings were transferred by the Income Tax Officer, without raising any objection till the assessment order was passed. Even in the appeal preferred by the assessee before the CIT (Appeals), no such ground was ever raised by the assessee. In such circumstances, we are of the candid view that as per law, the respondent/assessee was not within his right to raise the objection regarding issuance of notice by the Income Tax Officer under Section 143 (2) of the I.T. Act or questioning the authority of the DCIT in passing the assessment order while exercising powers under Section 143 (3) of the I.T. Act before the ITAT.
Thus, in the light of the provisions of Section 292B as well as Section 292BB of the I.T. Act, the right of the assessee has been restricted to challenge the validity of a notice issued by the Income Tax Officer or the assessment order passed by the DCIT and in such circumstances, the ITAT has illegally passed the impugned order ignoring the said provisions, which restricts the right of the assessee.
Question of law framed by this Court is answered in affirmative and the impugned order passed by the ITAT is set aside.
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2025 (4) TMI 1570
Penalty u/s 271E - repayment of loan to the extent of more than twenty thousand rupees by the assessee is in violation of provisions contained in Section 269T - appellant has not proved reasonable cause for its failure within the meaning of Section 273B - HELD THAT:- A combined reading of the provisions contained in Section 271E [which provides penalty for failure to comply with the provisions of Section 269T] and Section 273B of the Act makes it abundantly clear that if the assessee shows reasonable cause for the failure to comply with any provision referred thereto, the penalty for its violation of Section 269T of the Act shall not be imposable on the assessee.
The word 'reasonable cause' has not been defined in the Act of 1961. Therefore, in the context of the penalty provisions, the words 'reasonable cause' would mean a cause which is beyond the control of the assessee. 'Reasonable cause' obviously means a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fides.
In our considered opinion, bona fide belief coupled with the genuineness of the transactions would constitute a reasonable cause. Furthermore, the transaction which was bona fide and not aimed to avoid any tax liability would constitute a reasonable cause within the meaaning of Section 273B for not invoking Section 271E.
in our considered opinion, the cause shown by the assessee that on the insistence of M/s. Tata Finance Corporation to pay the amount of loan in cash vide its letter dated 5-11-2012, would constitute a reasonable cause within the meaning of Section 273B of the Act and also in light of the decision of Kum. A.B. Shanthi's case [2002 (5) TMI 4 - SUPREME COURT] reasonable cause has been shown by the assessee for non-compliance with the provisions contained in Section 269T of the Act and the transaction is genuine and bona fide which is not disputed by all the three authorities, however, all the three authorities ignored the provision contained in Section 273B of the Act and proceeded to levy penalty under Section 271E of the Act rendering the provision contained in Section 273B of the Act otiose, as the provision contained in 271E of the Act for imposition of penalty for non-compliance of Section 269T of the Act is subject to Section 273B of the Act.
The order imposing penalty passed by the AO, affirmed by the first appellate authority by order dated 25-10-2022 and further affirmed by the second appellate authority by order dated 6-9-2023, are liable to be and are hereby set-aside/quashed and it is held that since the appellant has shown the reasonable cause within the meaning of Section 273B the appellant is not liable to pay penalty u/s 271E for non-compliance of Section 269T. Substantial question of law is answered against the Revenue and in favour of the assessee.
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2025 (4) TMI 1569
Validity of Reopening of assessment u/s 147 - Reasons to believe - whether notice under Section 148 of the Income Tax Act, 1961 requires reasons in support of notice or not? - whether official respondent while issuing notice u/s 148 require to furnish reasons or not?
HELD THAT:- The general principle insofar as providing opportunity or reasons in support of any adverse order or civil consequence, in such circumstance invariably reasons must be supported. In the present case, by virtue of notice u/s 148, petitioners are required to submit their explanation or whatever the materials. In this regard, unless and until petitioners are made known that they have to answer to the notice and it is not supported by reasons, otherwise they are not in a position to submit effective reply / explanation with the material information. On this score the petitioners have made out a case. Reassessment notices set aside. Assessee appeal allowed.
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2025 (4) TMI 1568
Validity of final assessment order without considering the petitioner's request for adjournment - validity and effect of the affidavit filed by the Income Tax Officer which contradicted the petitioner's claim regarding the adjournment request - HELD THAT:- Department when confronted with the contradiction of the aforesaid affidavit with the facts on record of the case submits that the deponent of the said affidavit had insisted on filing the present affidavit stating the above facts and the remarks to that effect have also been received by her in writing. She however, expresses her apology as counsel and seeks to withdraw the aforesaid affidavit.
We accept the apology of Ms. Mehta, however, we decline the permission to withdraw the present affidavit which has been tendered before us. The same is directed to be kept on record.
Let notice be issued to the deponent of the said affidavit - Shri Ashish Kumar Gupta serving as Income Tax Officer (Exemption) Ward-2, Ahmedabad, to explain the circumstances which has led to filing of the present affidavit, returnable on 3rd March, 2025.
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2025 (4) TMI 1567
Reopening of assessment u/s 147 - period of limitation - assessee failed to explain the source of the cash deposit - HELD THAT:- We find since the notice u/s 148 of the Act has been issued after the statutory due date as per the decision of Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)], therefore, such notice for reopening being barred by limitation has to be quashed. We accordingly, quash the re-assessment notice issued by the AO. Since the assessee succeeds on this legal ground i.e. validity of re-assessment proceedings, therefore, the grounds challenging the addition on merit are not being adjudicated being academic in nature. The grounds raised by the assessee are accordingly allowed.
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2025 (4) TMI 1566
Disallowance @ 25% of various expenditure - non rejection of books of accounts - whether AO has not followed the direction of the DRP? - HELD THAT:- The voluminous evidence regarding the expenses were submitted before the AO. The copies of those documents, addition evidence, submission, etc. were also furnished before us in the paper book with the certification that these were dully submitted before the lower authorities.
AO had not consider the additional evidence submitted before the DRP and that is why he has not made any comment thereon.
AO is duty bound to incorporate the specific directions issued by the DRP in the relevant para of the assessment order and do needful accordingly.
DRP directed the AO to reconsider and verify the submissions (including additional evidence) before completing the assessment. DRP direction did not mandate the AO to provide opportunity of being heard to the assessee on this score.
From the perusal of the final assessment order, it is not evident that whether the AO followed the direction of the DRP in this regard as there is no such mention in the final assessment order. Thus, it cannot be held that the AO has not followed the direction of the DRP in this regard as it cannot be ruled out that the verifications of submission might have not resulted new facts other than those mentioned the draft assessment order. Hence, the argument AO had failed to carry out the statutory duty to abide by the direction of the DRP as the AO had not issued any notice to the assessee, nor did he independently examine the additional evidence filed by the assessee before the DRP is held to have no merit.
AO has adopted an ad-hoc percentage of 25% to make a disallowance out of certain expenses. AO has not given any rational basis for the same except holding that the assessee has not filed details of employee cost of Rs. 16.40 Crores and Marketing expenses of Rs. 148.00 Crores. however, the facts are contrary as evident from the Paper book and statement at Bar by the Ld. Counsel that the assessee has submitted these details much time ahead of the draft assessment order.
As per various benches of the Tribunal on the issue of the disallowability of expenses on ad-hoc basis without rejecting the books of accounts. In the present case the AO has not specify any shortcoming/discrepancy in the bills, vouchers, etc. in the expenses. The books of accounts have not been rejected by the AO.
AO has not pointed out that any part of the expenditure in question is either found to be bogus or fictitious nor is found to have not been incurred by the assessee wholly and exclusively for business. There is no mention of rationale in arriving at the percentile of disallowance in the instant case. Further, there is no clear findings as to the number of bills and vouchers requiring denial of allowances with the amount of expenditure and nature of defects therein or therewith.
AO’s action (25% disallowance out of certain expenses) is hereby deleted. Appeal of the assessee is allowed.
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2025 (4) TMI 1565
TP Adjustment u/s 92CA (3) - international transaction of “provision of Software Development Services” - TPO held that XS CAD India Private Limited is functionally comparable to the Assessee and retained as a comparable company on the ground that the services provided by the Company are predominantly software development services, which are similar to the services provided by the Assessee - HELD THAT:- XS CAD India Private Limited cannot be said to be functionally comparable to the Appellant, accordingly, we direct the TPO/A.O. to exclude excess XS CAD India Private Limited while benchmarking the international transaction pertaining to provisions of IT support and related services.
Since, AR submitted that by excluding the XS CAD India Private Limited from comparables, the Assessee will be at Arm’s Length, accordingly, not canvassed any argument on the other comparable companies, thus, the Ground is partly allowed.
Corporate tax addition made by disallowing the claim of donation made u/s 80G - HELD THAT:- As donation made to a Trust and Societies register under 80G of the Act for the purpose of compliance with the provision of Companies Act, 2013 regarding CSR activities and the subsequent claim made u/s 80G of the Act has been decided in the case of Tera data India Pvt. ltd [2023 (10) TMI 1376 - ITAT DELHI] as held assessee in the instant case had duly complied the provisions of Companies Act, 2013 read with CSR rules thereon and as per the provisions of the Income Tax Act had also voluntarily disallowed the CSR expenditure while computing the taxable income. Since, the donee institutions are eligible institutions enjoying exemption u/s 80G of the Act, the assessee has claimed deduction u/s 80G of the Act which is also provided in the statute itself to the assessee. Hence, denial of deduction u/s 80G of the Act to the assessee would result in gross injustice.
Thus, we are of the opinion that denial of deduction u/s 80G of the Act to the Assessee would resulting gross injustice, accordingly, we direct the A.O. to grant deduction u/s 80G of the Act if other conditions of Section 80G of the Act are fulfilled - Decided in favour of assesssee.
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2025 (4) TMI 1564
Revision u/s 263 - re-assessment order so framed u/s 147 r.w.s. 144B to be modified/set aside on the ground that such order of the AO is erroneous and pre-judicial to the interest of the Revenue - without proper enquiry on the bonafides of LTCG claimed as exempt u/s 10(38) - HELD THAT:- Pr.CIT in backdrop could step in u/s 263 only if it is demonstrated that the approach of the AO is perfunctory. Such finding would depend on specific facts emerging from record. In the instant case, purchase/ allotment of shares took place nearly three years prior to the year of sale. The payments were made through banking channel.
The company underwent corporate restructuring in the intervening period. The factum of actual payment and investment towards purchase of shares is demonstrable from record and further supportable by corresponding receipts of shares in Demat account. CIT has merely alleged inadequacy in enquiry on the basis of absence of the bank name which is also discredited from the facts emerging from record. No third party statement or SEBI report etc. is available to impair the bonafides of claim of the assessee.
No adverse material is brought on record to warrant deeper scrutiny. In our opinion, the view taken by the AO thus cannot be assailed when tested on the touchstone of circumscribed allegations on bank particulars leveled in the revisional order.
We also find merit in the contention of the assessee that some inadequacy in the manner of inquiry cannot necessarily be a ground for invocation of powers u/s 263. Such view has been expressed in the judgments rendered by Sunbeam Auto Ltd [2009 (9) TMI 633 - DELHI HIGH COURT] DG Housing Projects Ltd [2012 (3) TMI 227 - DELHI HIGH COURT] Clix Finance India Pvt. Ltd. [2024 (3) TMI 157 - DELHI HIGH COURT] And Klaxon Trading Pvt. Ltd. etc. [2023 (12) TMI 36 - DELHI HIGH COURT] In the instant case, the alleged inadequacy towards bank particulars is also not correct.
The facts of the present case do not indicate that the twin conditions contained in sec. 263 are fulfilled in letter and spirit. Appeal of the assessee is allowed.
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2025 (4) TMI 1563
Non granting exemption u/s 11 and 12 - missing entry in the income tax return - charitable activity u/s 2(15) - HELD THAT:- It appears that while filing the return of income, the said counsel did not fill in the column 6(i) relating to the amount applied to charitable purposes in India during the previous year. While he had correctly filled the amount of exempt income claimed and the amount that have been accumulated or set apart for application to charitable or religious purposes to the extent it did not exceed 15% of the receipts, he had left the column relating the amount applied to charitable purposes as blank.
Therefore, addition had been made during the course of assessment and CIT(A) instead of appreciating that the exemption could not be denied only on account of a missing entry in the income tax return, had adopted a pedantic approach in considering what expenditures were allowable under income from sources and what were not.
In our opinion CIT(A) should have paused to consider that the society was a registered trust u/s 12A and therefore, it was to be assessed under the tax regime prescribed for societies u/s 11, 12 and 13. What had to be seen in such cases was whether the income of the society had been applied towards charitable purposes enshrined within the objects of the society, for which the CIT had granted the registration u/s 12A.
The mere fact that the assessee may have filled wrongly or omitted to fill a column in its income tax return, would not take away its eligibility for exemption, if it was otherwise eligible under the law.
Since, it is clear that the assessee trust had been registered under section 12A for the purposes of imparting education to students and it has not been pointed out that any expenditure made by the society has been made on matters outside the objects of the assessee trust or for non-charitable purposes, there was no occasion to sustain the disallowances of the nature that the CIT(A) has, on account of his understanding of what was deductible against income from other sources.
We have also perused the computation filed by the assessee society and after going through the same, we delete the addition sustained by the ld. CIT(A).
In making this decision, we rely upon the orders of Sh. Gujarat Bhavsar Samaj [2024 (11) TMI 94 - GUJARAT HIGH COURT] which has been placed by the ld. AR in her paper book, which lays down that where the assessee trust filed its return claiming application of income for charitable purposes, but due to a technical glitch, the income applied by the assessee was not reflected in the return and consequently revision application filed u/s 264 was rejected, the Hon’ble High Court held that since the assessee had incurred expenditure and applied income / donation received by it for charitable purposes, the assessee was entitled to benefit of the same.
We find that the facts in the aforesaid case are quite similar to the facts of the assessee’s case and therefore, relying upon the said order, we delete the addition sustained by the ld. CIT(A) and allow the appeal of the assessee.
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2025 (4) TMI 1562
Validity of CIT(A) order dismissing the assessee's appeal ex parte without adjudicating the appeal on merits - Procedure in appeal u/s 250 - HELD THAT:- Reasons which weighed in the minds of the adjudicating authority while adjudicating appeal on merits of the issues are cardinal as the higher appellate authority can then adjudicate appeal on the issues arising in appeal before them, based on decision and reasoning of ld. CIT(A) in deciding the issues.
If the ld. CIT(A) simply dismiss the appeal merely because the assessee did not comply with the notices issued by ld. CIT(A) in limine without adjudicating issues arising in the appeal on merits, such order is not sustainable in the eyes of law keeping in view provisions of Section 250(6), and also higher appellate authorities will be deprived to see what weighed in the mind of the ld. CIT(A) while adjudicating appeal as it will be an order passed without reasoning on the issues on merits.
The appellate order of the CIT(A) is clearly in violation of section 250(6) of the Act and liable to be set aside. Merely stating that the assessment order passed by AO is upheld, and that the assessee has not submitted details/documents is not sufficient.
CIT(A) is not toothless as his powers are co-terminus with the powers of the AO, which even includes power of enhancement. It is equally true that the assessee also did not complied with the notices issued by ld. CIT(A), and did not file the requisite details/documents to support his contentions. Thus, the assessee is equally responsible for its woes.
Thus, appellate order of CIT(A) is set aside and the matter can go back to the file of CIT(A) for fresh adjudication of the appeal of the assessee on merit in accordance with law after giving opportunities to both the parties. Appeal of the assessee allowed for statistical purposes.
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2025 (4) TMI 1561
Income deemed to accrue or arise in India - taxability of background screening services - Royalty or FTS under the provision of Article 13 of India-USA DTAA - HELD THAT:- Hon’ble Tribunal in assessee’s own case for AY 2021-22 [2024 (6) TMI 1457 - ITAT DELHI], while relying on aforesaid orders held that the background screening services provided by the assessee does not quality as royalty
Thus, background screening services provided by an assessee does not qualify royalty and no additions can be made on account of royalty and decided the appeals in favour of the assessee.
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2025 (4) TMI 1560
Addition by applying G.P. Rate on unaccounted sales - CIT(A) restricting the addition by applying G.P. Rate - some software were found during the search and Ratnakala Group, wherein there were some unaccounted transactions which were cash transactions - HELD THAT:- First of all, it is now matter of record that out of these unaccounted sales which has been added by the ld. AO, substantial part was accounted in the books of the assessee which has been verified and finding of fact has been given by CIT (A). Thus, entire sales could not have been added as unaccounted sales.
Even if it is admitted that there are certain unaccounted sales of diamonds, then there were also purchases of diamond which has been sold in cash to Ratnakala Group. In such a scenario, the entire sales could not have been added, because purchases have not been doubted at all by the ld. AO. Without purchases, sales cannot be affected.
Assessee’s total turnover/sale to other parties is in hundreds of crores and sale to this party is very less and out of which most of the sales has been accounted for. Accordingly, in such a situation only the gross profit rate on alleged unaccounted sales can be applied. Here in this case most of the sales made to the same party have been accounted in the books on which assessee had disclosed certain GP rate which has not been disputed.
In such a scenario, applying same GP rate is reasonable which can be applied on the sales which are alleged to be unaccounted. Accordingly, the observation and the finding of the CIT (A) for applying GP rate of such sales is upheld. Accordingly, the appeal of the Revenue is dismissed.
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2025 (4) TMI 1559
Estimation of income - Bogus purchases - AO applied a gross profit rate of 1.31% on the said amount, resulting in an addition - CIT(A) held as quite rational to follow the spirit of the judgment given by Hon’ble ITAT in the appellant’s own case and hold that the quantum of profit attributable to total bogus purchases may be calculated @ 0.2% of the same
HELD THAT:- We have also duly considered the order of the Coordinate Bench of the Tribunal rendered in the assessee’s own case for Assessment Year 2011-12 [2018 (8) TMI 1626 - ITAT MUMBAI]. In view of the binding judicial precedent and consistent findings in earlier years, the grounds raised by the revenue are hereby rejected.
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2025 (4) TMI 1558
Validity of reopening of assessment u/s 147 - Notice has been issued beyond 3 years but not more than 10 years from the end of the relevant assessment year - AO has reopened the assessee’s case based on the information received from SRO office that the assessee has entered into a transaction for purchase of a property for a sale consideration of Rs. 80 lacs which according to the ld. AO was to be reckoned as Rs. 1,12,78,500/- to be the stamp duty value, thereby adding the difference - HELD THAT:- Where the threshold limit of income which has escaped assessment cannot be lesser than Rs. 50 lacs as contemplated u/s. 149(1) of the Act. It is also evident that the said provision speaks of issuance of notice u/s. 148 and not the finality of the amount determined after assessment as contended by the DR. There is no iota of doubt that the criteria for issuance of notice u/s. 148 ought to have been income escaping assessment amounting to Rs. 50 lacs or more in cases, where 3 years but not 10 years have elapsed from the end of the impugned year.
In the present case in hand, the assessee was in a better footing where the notice issued by the ld. AO u/s. 148 of the Act dated 15.06.2021, and the subsequent order dated 30.07.2022, passed u/s. 148A(d) of the Act was only for income which has escaped assessment amounting to Rs. 32,78,500/-. Therefore, the assessee’s case would squarely be covered by the decision of Naresh Balchandrarao Shinde [2022 (10) TMI 549 - BOMBAY HIGH COURT].
By respectfully following the same, we are inclined to hold that the notice u/s. 148 and the order passed u/s. 148A(d) are void ab initio and are therefore quashed. Decided in a favour of assessee.
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2025 (4) TMI 1557
Revision u/s 263 - allowability of legal and professional expenses, loan origination costs, and Direct Selling Agent (DSA) costs u/s 37, allowability of other expenses including year-end provisions, treatment of cost allocation charges, allowability of finance costs amounting to Rs. 40.35 crores, correctness of depreciation claimed and admissibility of employee benefit expenditure
HELD THAT:- When due enquiries have been made by the AO in the course of assessment proceedings, merely because the fact of making enquiries were not recorded by him in the assessment order, the order of the ld AO does not become erroneous. There is no need for the AO to state in his assessment order as to what enquiry he had made with regard to various issues in the assessment. He is expected to address only those issues where he is not in agreement with the claim of the assessee and he is not expected to write a thesis in the assessment order. Merely because a particular fact of enquiry is not reflected in the assessment order of the AO, it does not automatically tantamount to non-enquiry by the AO and assessment being framed with non application of mind by the ld AO.
Legal and Professional charges, loan origination cost and DSA cost - more than adequate enquires have been made by the ld AO with regard to legal and professional charges and loan origination cost in the assessment proceedings itself. Hence, it cannot be said by any stretch of imagination that adequate enquiries were not made by the AO. This is not the case of no enquiry by the ld AO qua the impugned issue.
PCIT had merely directed the ld AO to examine the allowability of the same u/s 37 of the Act in the light of the observation given by the auditors in the financial statements. PCIT had not even stated as to why the observations made in the financial statements by the auditors have any adverse impact on the computation of income of the assessee qua these issues. On the other hand, the assessee had furnished complete details and had also proved before the AO that this has been claimed by it on a consistent basis by clearly bringing on record the differential treatment given in the books of account and in the income tax computation. PCIT had merely directed the AO to make fishing and roving enquiries on the impugned issue, without bringing on record the error committed by the ld AO in the assessment order.
Other expenses which includes year-end provision - The assessee furnished the reply dated 07.04.2021 giving the details of various expenses in a tabular form explaining the nature and the amount incurred under the respective head. The assessee also submitted that the revenue had increased three fold during the year from its business operations whereas the expenditure had increased only less than 2 fold during the year. Accordingly, it justified the claim of expenses to be in consonance with the revenue earned during the year.
The assessee also gave the specific explanation with regard to year-end provision of Rs. 7.91 crores by drawing direct attention to Note No. 24 of the audited financial statements which is already reproduced supra as to how the year-end provision for expenses are accounted and reflected.
Even before us, the assessee explained that in the computation of income, the amount of Rs. 6.77 crores being year-end provision created, was suo moto disallowed by the assessee and the balance provision of Rs. 1.13 crores pertains to the provision for capital expenditure which has not been included in the capital work in progress and not all debited to profit and loss account. Hence, there is no question of disallowing year-end provision again for Rs. 7.91 cores as directed by the ld PCIT in his revision order.
No hesitation to hold that the ld PCIT grossly erred in assuming revision jurisdiction u/s 263 of the Act qua the issue of other expenses and year-end provision for expenses.
Cost Allocation charges - We find that the ld PCIT had not understood the basic fact that this cost allocation charges represent income of the assessee and not expenditure. Without understanding this preliminary fact, he had directed the ld AO to verify and examine the same. Either way, this is not even prejudicial to the interest of the revenue as it only represent income of the assessee. Hence, revision jurisdiction u/s 263 of the Act could not be exercised by the ld PCIT for the same.
Finance Cost - The assessee filed its reply dated 08.01.2021 giving the complete details of long term and short term borrowings obtained from various banks and financial institutions together with the details of interest paid thereon. Hence, it cannot be said that the ld AO had made any enquiry on the finance cost of Rs. 40.35 crores.
PCIT erred in assuming revision jurisdiction u/s 263 of the Act qua this issue. Further, we also find the ld PCIT absolutely without any basis had concluded that the finance cost is not allowable as deduction. As stated earlier, the finance cost is the raw material for a finance company. How the raw material (interest paid in this case) be not allowed as deduction. It is not even the case of the ld PCIT that the borrowed funds were not utilized by the assessee for its business. The assessee is engaged in the business of financing i.e. advanced loan to others and earning interest income. For this purpose, it had used own funds as well as borrowed funds. For the borrowed funds, it has to pay interest. That interest cost becomes an allowable deduction under the head business.
Depreciation - There is absolutely no reason for the ld AO to take a divergent view in this regard. Very strangely the ld PCIT goes to conclude that the depreciation has not been correctly claimed which is without any basis and the decision of the Hon'ble Supreme Court in the case of ICDS Ltd had to be rejected without adducing any reasons. The directions given by the ld PCIT to the ld AO are merely to make fishing and roving enquiry which, in our considered opinion, is not permissible in proceedings u/s 263. Hence, we have no hesitation to quash the assumption of revision jurisdiction u/s 263 of PCIT qua this issue.
Employee benefit expenditure - The employee benefit expenditure based on actual and based on actuarial valuation are reflected in the audited financial statements at pages 3 to 53 of the Paper Book vide Note No. 23 of the audited financial statement.
PCIT does not find any error in the said working. In fact the assessee had already made suo moto disallowance of amount debited to the profit and loss Account with regard to provisions made on account of employee benefit expenditure and had claimed the actual amount of payment of gratuity and earned leave encashment in accordance with provisions of Section 43B of the Act. This fact is also duly reflected in the tax audit report. Whatever is the unpaid portion, the assessee had voluntarily added back in the computation. We find that the ld PCIT does not point out any error in the action of the assessee or in the action of the ld AO in accepting to the contentions of the assessee.
We have no hesitation to quash the entire revision order u/s 263 of the Act by the ld PCIT by holding that revision jurisdiction have been invalidly assumed by PCIT and his action cannot be sustained in the eyes of law. Accordingly, grounds raised by the assessee are allowed.
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2025 (4) TMI 1556
Reference made to the Special Bench in the present case be withdrawn or not in the wake of the Hon’ble Jurisdictional High Court of Mumbai admitting an identical question - Disallowance u/s 14A -
Whether Special Bench can proceed with the hearing of the issue in view of the fact that the Division Bench had expressed its inability to concur with the view taken by the co-ordinate Bench in the case of Oman International Bank SAOG [2014 (1) TMI 537 - ITAT MUMBAI]? - HELD THAT:- The issue before this Bench has already been considered by the Special Bench of this Tribunal in Summit Securities Ltd. [2011 (8) TMI 657 - ITAT, MUMBAI] has also considered certain practical aspects which would eventually lead to incongruity if it is held that the Special Bench has to stay its hands and/or is liable to be disbanded in the event of a similar/substantial question of law being pending before the High Court. The Special Bench has noticed that such a course of action would lead to pendency of the issue before the Special Bench and eventually before the Division Bench also requiring the Division Bench to await decision of the Special Bench.
The Special Bench has clarified that this has no bearing on the powers of the President to constitute or de-constitute any Special Bench and/or withdrawing reference in the facts of each case.
It is not shown that the decision in the case of Summit Securities Ltd. (supra) was challenged any further. For all practical purposes, the said decision can be said to have attained finality.
Revenue has placed reliance on the order passed in the case of Tivoli Investment and Trading Co. (P.) Ltd. [2011 (4) TMI 876 - ITAT, MUMBAI] on the administrative side and the decision of Harsha Achyut Bhogle [2007 (10) TMI 640 - ITAT MUMBAI] in support of her submissions. We find that all these three orders have already been considered by the Special Bench. We find that the Special Bench has rightly found that these decisions have no bearing on the question involved.
We find that Section 253 of the Act confers statutory powers on the Tribunal to decide appeals challenging the orders of CIT(A) and other orders as are permissible under the said Section. Section 255(3) of the Act also confers statutory powers on the President to constitute Benches, including a Bench comprising of three or more Members to decide any particular issue.
From the submissions advanced at the Bar, it appears that Revenue has no objection for the Division Bench continuing the hearing and considering the issue. It is difficult to see as to how only the Special Bench would be precluded from hearing the matter if according to the Revenue the Division Bench can hear the same. There is one more aspect of the matter as pointed out by the learned Senior counsel for the assessee. It is pointed out that if the reference is withdrawn and the matter goes back to the Division Bench, it will be compelled to take a view and agree with the co-ordinate Bench in the case of HSBC Bank Oman S.A.O.G (supra), which would be contrary to the opinion earlier expressed by the learned Members of the Division Bench expressing their inability to concur with the view as expressed in the case of HSBC Bank Oman S.A.O.G (supra). We find that the contention is justified.
We also find that in the case of intervenor (appeals before the Delhi Benches, which appeals have since been disposed of on 03.09.2021) and in the case of Summit Securities Ltd. (supra), the Revenue had taken a contrary stand. We cannot appreciate the Revenue taking such contrary stand on the issue involved in this matter.
We find that there is no prohibition either in law or in practice which has been pointed to us which would require the Special Bench as a rule to stay its hands when a similar/identical issue is pending before the High Court. This is albeit subject to the considerations on the basis of propriety, which the Special Bench itself may consider depending on the facts and circumstances of each case.
In the present case, except that the appeal by another assessee, namely HSBC Bank Oman S.A.O.G (supra) has been admitted by the High Court, nothing has been brought on record to require the Special Bench to stay its hands. There is one more reason why we are inclined to hold that the Special Bench need not be deconstituted and the reference withdrawn. It is necessary to note that the dispute relates to assessment year 1998-99. The appeal itself is of the year 2004. Therefore, in our considered opinion, hearing before the Special Bench brooks no further delay. In our humble opinion, the Special Bench can proceed to hear and decide the appeal in accordance with law. Subject to this, we hold that it is not necessary to withdraw the reference and/or to deconstitute the Special Bench.
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